Reader Story: Patience and Persistence Pay Off

This guest post from Alissa is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. I like all of the reader stories I publish, but for some reason I particularly like this one. Update: Now with photos! Alissa e-mailed two images of her chain of debt.

In April 2007, I found myself owing $6,500 to my credit cards and $24,000 on my student loans. While not a lot, I was only earning $31,000 and living in Washington, D.C. Earning $31,000 in the D.C. area is not a comfortable salary, especially when you have to pay a large portion of your health insurance costs out of pocket after taxes. Thankfully my student loans were all Stafford loans, and I had them on an income-dependent payment plan.

It was around this time that I officially decided that I wanted to go back to school to get my PhD. In Microbiology, you don’t get much freedom in research with only a BS. I knew getting into graduate school would be hard, and that simply paying for the application process would set me back a few hundred bucks. I also knew that the average stipend for a Microbiology PhD student wasn’t large, so I wanted to go off to grad school with as little debt as I could.

Breaking the chain of debt
To get the ball rolling, I decided that I needed a visual reminder of my debt, something I could look at every day. So I made myself a literal paper chain of debt. I made each link worth $100 and each color group a thousand. Each time I dipped below an amount on a link, I could reward myself by cutting it off.

I was so psyched each month when I could cut off more than one link! But to get myself credit card debt-free in less than two years and not have to pay for my applications with more debt, I had a lot of work to do.

Doing the right thing
I was in the midst of learning about personal finance and was able to find some very simple things that worked well for me to help me spend less than I earned and still have money to pay off my debt. I really don’t feel any of these are particularly special or unique, but it took me a while to realize that I could make it all work and pay off my credit cards. Here are some of the major things I did to help me reach my financial goals.

The first step was to realize find out where my money was going, and to make a budget that would allow me to live — but within reason. Simply tracking my spending made me realize I was spending way too much on food, both groceries and eating out, and that I really didn’t need a fabulous new wardrobe.

I started doing work-trade at the yoga studio I was going to. Every Friday afternoon and evening, I sat at their front desk for a few hours checking people in and keeping the front of the studio neat. I also closed up and cleaned the studio after classes were done for the evening. While this only saved me $54 a month, it meant I didn’t have to spend that $54 to pay to go to classes, and that I didn’t need to feel guilty going to yoga as it helped keep me sane on many levels.

Every six months, I called my credit card companies to renegotiate my APR. I used the fact that I had a solid history with them and was an excellent customer as my bargaining chips. Thankfully, I’ve never been in a place where I’ve owed so much that I missed payments. If my first phone call didn’t work, I’d call back later and speak to someone else.

I started targeted savings. I put aside a bit of money each month for things like car insurance so that I could pay my six-month premium all at once, instead of having to pay extra for a payment plan. I also started putting money aside for medical issues. While I have no one big medical issue, I have a bunch of small ones that add up to being a pain. Having the money set aside for doctors appointments and medication really took a lot of stress off my shoulders.

Speaking of health insurance, to save even more money, during one of the open enrollment seasons, I changed my health insurance from a PPO to a POS. That change saved me another $45 a month, and I didn’t see any change in my health care.

I figured out roughly how much applying to grad school would cost, and I started putting money aside for that purpose too. Retaking the GRE and applying to eight schools set me back close to $700. In the end, I added no new debt applying to grad school because I saved for it.

Perhaps the second biggest thing I did was renegotiate my contract at work, which resulted in an extra $100 a month (adding a total of over $200 a month from these things alone to pay off debt).

But the single biggest thing was taking on a second job two evenings a week. I worked at a university at the time, and at the start of the fall 2007 semester, I learned that my department needed an evening teaching assistant for a class of career changers. While I wasn’t a graduate student, I did have a degree in the field and teaching experience at the high school level. I convinced the course director that I was more than qualified for the position and with my teaching experience, would likely give the class a different perspective than the average graduate-student TA. I did such a good job the fall semester that they automatically offered it to me in the spring. This alone gave me an extra $6,000 and is ultimately what helped me pay off my credit cards before coming to graduate school.

Even with the addition of a $2,000 emergency vet bill, all of my consumer debts were paid off March 2008, allowing me to save money for moving for grad school. I accumulated no new debt buying what I needed to move and had enough saved that I paid for what I needed after moving with cash.

Reaping the rewards
Now, two years into graduate school and earning the least I’ve earned since graduating from undergrad in 2001, I live more comfortably than ever. I carefully budget my money each month. I have not only a general emergency savings, but also targeted accounts. If one of my cats gets sick, I have money set aside to pay for it. I’m mindful of how much I spend on everything, knowing that if I’m careful, I can have some fun even on a meager stipend.

This has also allowed me to start paying back my student loans while still in school and while my loans are in deferment. It doesn’t sound like much to only owe $23,618 now, but I know that if I weren’t making any payments, I’d owe even more in the long run.

The biggest thing that helped me along this path was deciding what my goals were and then trying to align my actions with those goals. Blogs like Get Rich Slowly really helped me see that I could do it. This is the ideal I carry with me today.

Today, rather than being $6,000+ in credit card debt, I now have almost $5,000 in the bank to be able to reach the goals I’ve set for myself. I can now take a trip to see my parents this summer without having to worry about how I’m going to pay for it. No, I don’t get to eat out a lot, nor do I have the newest most fashionable clothing, but I’ve realized those things aren’t important to me. What is important to me is having money to spend on what I do think is important to me. To me, this is true financial freedom.

Reminder: This is a story from one of your fellow readers. Please be nice. After more than a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are. Henceforth, unduly nasty comments on readers stories will be removed or edited.

Congratulations! And thanks for sharing this story. You’ve got some wonderful techniques in there–I loved your “chain of debt” tool which can be such a great visual reminder of the goal someone has set for themself.

I love hearing PhD stories as my husband and I are both PhD students. We are making 1/4 our previous income through stipends and part-time jobs, but somehow we’re still able to make it all work AND pay on our student loans too. (I’m blown away by this every month…)This experience has taught us a lot about money. We plan to continue to live frugally once we graduate and finish paying off these student loans! Good luck on your PhD!!! :)

Let me ask, what is the status of the student loan? I currently have a family member also dealing with a very high amount of student loans. Has it been your experience that college can be afforded without loans or do you think it is worth it to get this deep into debt for an education?

Very impressive in terms of discipline and long-term thinking. One thing, if your loans are in deferment, then they aren’t gaining interest while you’re in school. I’d recommend you continue paying them down in a different way. Instead of paying the loan company, put the money into one of those separate accounts you spoke of and reap the rewards of several years of compound interest. Then, right before your loans come out of deferment, take that cash and make a huge lumpsum payment. This approach let’s your money grow (a little) and provides some additional flexibility in case of a catastrophic event.

What an inspiring, well-written post. LOVE the chain of debit concept. What a perfect and consistent visual reminder. When I was paying off my debt, I kept it in a boring old ledger format. Your way is much more creative.

It’s great to hear of someone living on a “meager” (to use your words) income, yet still enjoying life to the fullest. Good for you!

I love the chain link system! I’ll definitely give that a try. I admire you for tackling your debt and saving as you go. Sometimes I have to choose between adding money to my savings or putting it on my credit card.

Good for you Alissa! Not only will you have solid credentials but will have learned so many life/financial lessons to make you an even better citizen of the world, so to speak. One sentence you wrote was key to me, “….it took me a while to realize I could make it all work…” Like any success, a lot of it is achieved through the hard work of implementing small tasks over and over, seemingly inconsequential things that will eventually add up to the payoff. In my mind, it’s that which is so hard for many people to not only grasp but practice.

Alisa, I agree with Maureen that your discipline is inspirational. Few people in our culture of ‘want lots and want it now’ share it. But it’s teachable . . . . and you’re a teacher. So, I think that colleges should hire you as a speaker at their graduation ceremonies! You and I used somewhat different techniques to deal with debt, both quite effective: http://www.diamondcutlife.org/top-five-tips-on-breaking-free-of-credit-cards/

“I started doing work-trade at the yoga studio I was going to. Every Friday afternoon and evening, I sat at their front desk for a few hours checking people in and keeping the front of the studio neat. I also closed up and cleaned the studio after classes were done for the evening. While this only saved me $54 a month, it meant I didnâ€™t have to spend that $54 to pay to go to classes”

I want to highlight this because as a business owner, I constantly hear other business owners talk about how they can’t afford to hire someone. Sometimes, your customers can become some of your best employees (and they’ll work cheaply, too.) I arranged this sort of trade with several of my web hosting customers and it worked out great. You don’t need to hire a full-time employee–and you may be looking right over someone who can help out for a few hours a week in exchange for getting some of your product or service for free.

To those of you with questions about my student loans, I have subsidized and unsubsidized Stafford loans. Technically because I am back in school, they are in deferment. I know my subsidized Stafford loan will accumulate no new interest, so I’m leaving that one alone while I’m in school. But because savings account interest rates are so low right now, I’ve chosen instead of saving money for them, to send a payment each month just for my unsubsidized loan. Even consolidated, you can ask Sallie Mae to apply your payment to a particular part of your student loans. It’s a bit of a pain as you have to email them every time and ask, but they will do it.

Fantastic work, Alissa! I love the paper chain in particular and your determination to get your credit card rates lowered. Many people (myself included, probably) would have given up when the first CSR said no.

Paying off the unsubsidized loans is a smart move in my book. Just get it out of the way.

@ #8/Slug
I also agree with Slug. If you can postpone making payments with your subsidized loans, I’d recommend doing that. Take that money and put it into a bank. Look for high interest checking accounts. There are sites that list the national rates. I am earning 4% in my checking account. Just something to look into.

Also, love the paper chain. It is great to work a visual reminder of debt and the pay off of same.

Great to hear from someone paying off debt while living on small salary. Too often people think you need a 6 figure salary in order to make progress. This post demonstrates that you don’t have to have a big salary to kill your debt and save for your goals.

Excellent, timely post! I’m a grad student too, and though my husband and I are paying off all of our student loans and other debts, and saving money each month (in an IRA, 401k, and in a $6k emergency fund), I always feel like we’re barely staying a step ahead on the short term expenses.

A few things:

1. The chain idea is really cool, I’ll have to try it.

2. Now that you mentioned a timeline, I think I’ll actually draw one out so I can visualize how much time there is before future goals (like having kids, retiring, traveling, etc)

3. Your comment about setting aside money so you don’t have to borrow to see your parents next time is exactly what I needed to hear. I think I’m going to start targeted saving right now (I’m sure I can find $25-$50 per paycheck) for when we visit family this winter.

And to Commenter Luis:
I have a large amount of federal as well as private student loans, and although I am very frustrated by the length of time I will be paying them off, I don’t regret it in the least. My husband and I both had to borrow to go to college, and rather than put every drop of income we made working part-time toward staying debt free, we enjoyed a lot of the fun benefits of being in college (we were both in the Greek system). If not for that choice (made individually), we would never have met, and we would never have been able to make such good friends. To be fair, we were both lucky to be able to find good steady employment even in the recession, I’m not sure I would have felt so satisfied in my choice if we were having difficulty making payments.

Excellent work, love the paper chain and the discipline. I hope your mind feels free as you head towards grad school!

One question – I’m impressed by all the little strategies you used to tackle your debt and finances, but, given that you live in DC – how did you handle (what I would have guessed was) the biggest expenditure, i.e., housing?

I REALLY love what you did with the paper chain! All of your other actions were very wise and obviously paid off, but I like the idea of having a visual representation of your debt that you can physically cut into to represent the work you did to get rid of it! I am a very visual person (plus I have a dangerous love for scissors and anything that I feel is a reward) and I think I might be very motivated to chop up a paper chain like that (I can’t find a way to word that which doesn’t end up sound sarcastic – trust me, I’m totally sincere!) Congrats on all you accomplished!

Congratulations on completing the first two years of a microbiology Ph.D. program – that can’t be easy! The persistence you have developed in your financial life will no doubt serve you well when it comes to finishing your degree. Only two (three, four?) more years! Best of luck with your future career.

Good job. THE paper chain is a nice idea to help visualize and make the debt something physical that you see and touch. I’m sure thats a good tactic for many people rather than the money being purely an electronic thing.

I appreciate the chain, a visual reminder is so effective. I really like that you accounted for everything and budgeted for all that you could possibly think of. Vet bills, yes, a serious financial pull when you least expect it. Great job!

Wow, this hit home. I’m a recent grad in DC making entry-level pay with almost the same amount of debt. The big key is taking that part-time job!!!! I’ve been thinking about finding a side job for awhile so I can aggressively pay down my debt, but never acted on it. To hear someone in such a similar situation articulate its importance makes all the difference… thanks for the motivation!

Alisa, You must tell us how you got the idea for the paper chain. I can just imagine you looking at that everyday and wanting it to go faster. The motivation it created must of really helped. I wonder what people thought when they came to your home and saw that.

I guess you reached a time in your life when you made up your mind to do something drastic so you could pursue your goals. You lived with much sacrifice so later you could live your dreams

I’m slowly on the road leading out of excessive debt and enjoy reading posts like yours. My journey will take me years to complete yet I also want to get a Ph.D (got my Master’s last year)… so it can seem daunting at times. People like yourself are proof that it can be done–thanks!

It’s funny how having a set end time can be so motivating. I also set a goal to pay off credit card debt ($10,000) before starting grad school. We managed to do it in a little less than a year, while living in NYC and getting paid intern salaries.

I hope your PhD allows you to have the type of job you want. I don’t regret going for my master’s even when I look at my loans, because I love the work I do now (which requires a master’s).

Really enjoyed reading this, especially since I completed my PhD in Microbiology not too long ago. Although I didn’t have any student debt when starting grad school, I learned the hard way about budgeting on a grad student income. Good luck with finishing! A postdoc salary isn’t that much more than that of a grad student, so the frugality will come in useful down the road.

Your paper link idea is exactly what I was looking for, thank you so much for your story. My husband and I are in the process of paying off 24k of debt and we’re down to 9,700 and looking for ways to keep us motivated – this is a perfect solution. A visual reminder of what we have to go, but a satisfying achievement everytime a colour link gets chopped off. PERFECT.

Alissa, I know what you mean about going from $24,000 to $23,618. I have been paying my (huge) Stafford loans for 3 years since I graduated. At first it was so difficult seeing myself making these good sized payments every month that were mostly eaten up by the interest that had accumulated on the unsubsidized loans during that time! I would think how many hundreds of dollars I had to put in just to see the number go down one more thousand (at first it took me about 4 or 5 months of paying $450 per month to go down each thousand).

I have more to pay than you do, but anyway I really congratulate you on how you made paying the loans off fun. When seeing the numbers go down is not that exciting in itself sometimes you really need a little bit more motivation to keep plugging at it.

The chain thing is cool (and a nice metaphor), like others have said. But I really like the yoga class part. Some may think this is an unnecessary expense when you’re in debt and not making much extra money. But it had value to you so you found a different way to pay for it. Nice!

For Alissa’s current federal loans, 236 rings of $100 paper chains would be required (probably over 20 feet long). Is that psychologically overhwhelming? I don’t know, but it’s a fair question. That’s a lot of paper chains to carry around for 10 years (assuming you get rid of approximately 24 rings per year). I think the paper chain is very powerful for short term goals, because you can see the results, but may require modification for long term goals.

One thing I am curious about is why she only appeared to make the paper chain for the credit cards and not the federal loans? What visual reminder does she use to get rid of the federal loans, particularly since PhD programs can be several years long and she is currently in deferment?

You can increase the amount that each link is worth, but then it’s harder to see the gradual progress (2-3 links a year). I’m mostly curious because I have my own visual debt reduction gimmicks that run into this problem.

This post was great! Alissa’s story was really inspiring to me. I am also a resident of DC, owing $6500 in credit card debt and about $18,000 in student loans. My situation has at times felt overwhelming. But Alissa’s success makes me feel like I can do the same! Thanks so much!

Great job Alissa! The chain link is a great idea, although I think ours would be HUGE!

I’ve always tried to think of ways to visualize our debt better so we are reminded of our goals to pay it off. Right now I have the amounts of each debt as part of their category in YNAB. So, Car Loan 1 – $5,000 and Car Loan 2 – $12,000 and so on.

I love, love, LOVE the idea of the debt chain! I’ve had my credit cards paid off for a couple of years (to prepare for the last year of grad school when my income was going to dip), and now I’m looking at $60,000 in student loans from a previous degree as well as a $30,000 second mortgage I’d like to pay off early.

I’m going to create a debt chain so that I can actually ‘see’ my debt disappearing as I pay it off each month. What a great idea, and one that will help me to stay motivated as I demolish my remaining debt over the next few years. . . .

This is interesting because I did something similar months ago…its still on my wall but it will be down within a month.
I created a “clock” with one hand out of paperboard. It was partially inspired by the infamous doomsday clock. It has 14 hours…each one representing 1000$ of debt. it also carrys the following quote:
“gold is the currency of kings, barter the currency of peasants and debt is the currency of slaves”.
This has been my motivation. One year ago this month I sat at 14 000$ of debt. Today the clock sits at 1300$…I will have it paid off within a month!!
I can’t wait to tear down the stupid thing!

AWESOME and inspirational post on becoming debt-free and reaching your goal of grad school. I love the paper chain visual, but I think the most important thing you learned was how to spend consciously. So many of us spend money without tracking it or setting priorities. I loved how once you set your priorities you figured out what you could do without, and what you really needed (yoga, for example). Well done!

KMJ – I don’t have a chain for my federal student loans because I don’t have the patience to make a chain that long! However, I am currently contemplating trying to get my unsubsidized Stafford loan paid off while I’m still in school. I currently owe close to $9K on that loan, which might be small enough for me to do a chain for. I am certainly considering it.

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

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